By May Wang and Ryan Rodenberg*
In a 19-page amicus brief filed on January 30, 2023, the United States Department of Justice (DOJ) has told the U.S. Court of Appeals for the Second Circuit that the Federal Baseball[1]antitrust exemption for Major League Baseball (MLB) “is of ‘dubious validity’ and should not be extended.”[2] The amicus brief—filed in the ongoing dispute between certain minor league baseball (MiLB) teams and MLB—represents the most vigorous statement to date of the government’s skepticism towards judicially-created exemptions from the nation’s antitrust laws for entities in the sports industry.
Over 100 years after being created by the Supreme Court’s 1922 Federal Baseball decision, the Second Circuit is the latest court to consider the continuing viability of MLB’s unique status as the only prominent sports league to have a judge-made antitrust exemption. In its amicus brief filed “in support of neither party”, the DOJ reaffirmed its district court-level brief in opposition to any expansion of MLB’s antitrust exemption.[3] Indeed, the DOJ emphasized that a “limited reading of [such] exemption is more consistent with the Supreme Court’s guidance to ‘strictly construe[]’ exemptions from the antitrust laws.”[4]
The DOJ’s new court filing was in response to the October 26, 2022 district court ruling dismissing the antitrust claim by four former MiLB teams against MLB for reducing the number of affiliated teams from 160 to 120.[5] Plaintiffs—a quartet of teams including the Staten Island Yankees, Norwich Sea Unicorns, Salem-Keizer Volcanoes, and Tri-City Valley Cats—had been affiliated with MLB teams under the Professional Baseball Agreement (PBA) since 1903. Such an arrangement “helps minor league teams fill stands and sell merchandise, [and also] benefits fans, allowing them the opportunity to see more professional baseball games in more communities.”[6] Upon the PBA’s expiration in 2020, MLB announced a replacement scheme. Under the new scheme, MiLB teams and MLB teams can no longer freely choose to affiliate with each other, as the quota of affiliation for each MLB team dropped from six to four. The four plaintiffs were among the 40 teams who lost their MLB affiliation.
The MiLB teams filed an antitrust complaint against MLB on December 20, 2021, claiming that MLB’s move violated the Sherman Act by harming competition in the MiLB affiliation market and, in turn, causing losses to the four plaintiff MiLB teams and their local communities. At the district court level, MLB argued for dismissal of the case for three reasons: 1) lack of antitrust standing, 2) failure to establish an antitrust violation, and 3) MLB’s antitrust exemption.[7] The district court granted MLB’s motion to dismiss “pursuant to the baseball exemption” and the MiLB teams filed a timely appeal to the Second Circuit.
Enter the DOJ.
In its new amicus brief, the DOJ pointed out the persistent disagreement on the scope of MLB’s antitrust exemption, stating: “Some courts have concluded that the Federal Baseball exemption is limited to a term in player contracts…effectively leaving the exemption a nullity…[o]ther courts have construed the exemption broadly…[yet] other courts have held that only conduct ‘central to the business of baseball’ is covered.”[8] Beyond that, the DOJ cited a host of precedents calling into question the baseball-specific carve-out from the nation’s antitrust laws.
First, the DOJ characterized the baseball exemption as “unrealistic[,] inconsistent[, and] aberration[al].”[9] Second, the DOJ recognized that “relevant market realities had changed dramatically…since Federal Baseball.”[10] Third, the DOJ cited with approval a Second Circuit concurrence which posited that “the Supreme Court’s recent decisions have completely destroyed the vitality of [Federal Baseball]…and have left that case but an impotent zombi[e].”[11] Fourth, the DOJ flagged the fact that “[t]he Supreme Court ‘has refused to extend Federal Baseball’s reasoning to other sports leagues.’”[12]
While the litigants are not duty-bound to respond directly to the DOJ’s amicus brief, it is likely that the three Second Circuit judges hearing the case later this year will consider the DOJ’s position. Given the curious procedural history in the case—the plaintiffs are arguing that MLB’s motion to dismiss should be granted on exemption-specific grounds in an apparent effort to quickly get the case before the Supreme Court—the Second Circuit could rule on the appeal in short order. If so, the DOJ will probably renew its conclusion via a Supreme Court-level amicus brief that “the application of antitrust law to professional sports has proven workable” and MLB should not be in a protected class vis-à-vis other leagues.[13]
* May Wang is a doctoral student at Florida State University with a research interest in corporate governance and social entrepreneurship. Ryan Rodenberg is a professor at Florida State University with a scholarly focus on sports law analytics.
[1] Federal Baseball Club of Baltimore v. National League of Professional Baseball Clubs, 259 U.S. 200 (1922).
[2] Brief for the United States of America as Amicus Curiae in Support of Neither Party, Nostalgic Partners, LLC, d/b/a the Staten Island Yankees, et al. v. the Office of the Commissioner of Baseball…d/b/a Major League Baseball, No. 22-2859 (2d Cir. Jan. 30, 2023) citing Radovich v. National Football League, 352 U.S. 445, 450 (1957).
[3] Id.
[4] Id. citing Federal Maritime Commission v. Seatrain Lines, Inc., 411 U.S. 726, 733 (1973).
[5] Id.
[6] Nostalgic Partners, LLC v. Office of the Commissioner of Baseball, 21-cv-10876, 2022 WL 5581351 (S.D.N.Y. Oct. 26, 2022) (internal quotes omitted).
[7] Brief for the United States of America as Amicus Curiae in Support of Neither Party, Nostalgic Partners, LLC, d/b/a the Staten Island Yankees, et al. v. the Office of the Commissioner of Baseball…d/b/a Major League Baseball, No. 22-2859 (2d Cir. Jan. 30, 2023).
[8] Id. citing Piazza v. Major League Baseball, 831 F. Supp. 420, 438 (E.D.Pa. 1993); Butterworth v. National League of Professional Baseball Clubs, 644 So. 2d 1021, 1024 (Fla.1994); Right Field Rooftops, LLC v. Chicago Cubs Baseball Club, LLC, 870 F.3d 682 (7th Cir. 2017); Laumann v. National Hockey League, 56 F. Supp. 3d 280, 297(S.D.N.Y. 2014); Henderson Broad. Corp. v. Houston Sports Association, Inc., 541 F. Supp. 263, 265 (S.D. Tex. 1982).
[9] Id. citing National Collegiate Athletic Association v. Alston, 141 S. Ct. 2141, 2159 (2021)(internal quotes omitted).
[10] Id. citing Flood v. Kuhn, 407 U.S. 258, 283 (1972).
[11] Id.
[12] Id. citing National Collegiate Athletic Association v. Alston, 141 S. Ct. 2141, 2159 (2021)(internal quotes omitted).
[13] Id. Indeed, the Supreme Court will potentially have the opportunity to review MLB’s antitrust exemption and attempt to reconcile the peculiarities of sport with general notions of market competition goals. In this way, the Supreme Court would be poised to elaborate on the dicta in American Needle v. NFL, 560 U.S. 183 (2010) about what activities in the sport industry are permissible under the nation’s antitrust laws.
